Santander Small Cap Conference October 2007
Disclaimer This presentation contains certain forward-looking statements and information relating to CIE S.A.B. de C.V. and its subsidiaries (collectively, CIE ) that are based on beliefs of its management as well as assumptions made by and information currently available to CIE. Such statements reflect the current views of CIE with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the actual results, performance and achievements of CIE to be materially different from any future results, performance or achievements that may be express or implied by such forward-looking statements, including, among others, changes in general economic, political, governmental, and business conditions globally and in the countries in which CIE does business. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or targeted. CIE does not intend, and does not assume any obligation, to update these forwardlooking statements. 2
Agenda 1. Introduction to CIE 2. Industry Overview 3. Business Strategy 4. Financial Performance 5. Summary 3
Agenda 1. Introduction to CIE 2. Industry Overview 3. Business Strategy 4. Financial Performance 5. Summary 4
Company Overview Leisure industry, out of home entertainment segment Top producer of live events in Latin America Leading participant in Mexico s gaming industry Third largest recipient of ad budgets in Mexico LTM revenues Ps. 10.2 billion LTM EBITDA Ps. 2.2 billion Market cap: Ps. 11,164 million (Oct. 1, 2007) 5
Organizational Structure CIE ENTERTAINMENT CIE LAS AMERICAS CIE COMMERCIAL OTHER BUSINESSES Ownership 60% 51% (pending) 94% varied 6M 2007 revenue contribution 31% 36% 20% 13% Partners Individual investor Lines of business Event promotion Venues management Ticketing Artist agency Food & beverages Sponsorships Bingo parlors Electronic terminals Sports books Horse racetrack Convention & expo center Petting zoo Sponsorships Pedestrians overpasses Billboards Rotational / static ads Naming rights Movie screen ads Tele services BTL Agency Amusement parks Radios (Argentina) Zoo (Argentina) Live entertainment in South America (minority stake) Alliances T4F
Agenda 1. Introduction to CIE 2. Industry Overview 3. Business Strategy 4. Financial Performance 5. Summary 7
Leisure Industry Overview In Home and Out of Home formats Competition for consumer s free time and spending money Out of Home entertainment includes: Travel Dining Museums Gaming Concerts Cinema Theater Sports Cultural, popular and folkloric events Etc. 8
Leisure Industry Overview Subject to state of the economy, consumer spending habits Total estimated worth of Mexico s entertainment industry: US$20+ billion Out of Home segment: US$3 billion MEXICO POPULATION 2004 Total Population: 103.8 Million 2025 Total Population: 124.0 Million Female 5.9 3.7 0.0 0.1 0.5 1.3 2.0 100 + 0.0 90-99 0.1 80-89 0.4 70-79 1.1 60-69 2.0 50-59 40-49 3.4 5.6 Male Female 8.9 7.5 5.4 2.9 1.2 0.0 0.3 100 + 0.0 90-99 0.2 80-89 0.9 70-79 60-69 50-59 40-49 2.4 4.8 7.1 8.6 Male 7.3 30-39 7.8 9.7 30-39 9.7 9.7 20-29 9.7 9.3 20-29 9.5 10.9 10-19 11.2 8.8 10-19 9.1 10.4 0-9 10.8 8.7 0-9 9.1 14 12 10 8 6 4 2 0 0 2 4 6 8 10 12 14 12 10 8 6 4 2 0 0 2 4 6 8 10 12 14 Population in Millions Sources: INEGI, CONAPO, CANIE and Company Estimates 9
Industry Overview: Live Entertainment Participants often fragmented (venues, promoters, ticketing, artists) Reputation is critical Technology has become an important driver: Allows fan to engage with artists Touring now more relevant to artists earnings Disposable income in the region has risen, thus entertainment spending should also increase Concert industry continues to grow Sources: Pollstar and Forbes. 10
Industry Overview: Gaming Pre- 1999 2000-2004 2005-2007 Gaming types Books Hippodrome Books Hippodrome Bingo halls Books Hippodrome Bingo halls Electronic terminal halls Regulation Books licenses linked to a hippodrome Books licenses linked to a hippodrome Licenses with no restrictions on linked businesses # of permits 90 (CIE: 45) 200 (CIE: 45) 380 (CIE: 65) # of facilities in operation 30 (CIE: 1) 100 (CIE: 31) 170 (CIE: 45) 1997: Concession granted to CIE for Hippodrome and 45 gaming venues 2004: Publication of Gaming Regulation New Licenses Sources: Opportunities in Gaming, ATE Intelligence, American Gaming Association, US. Dept. of Commerce Bureau of Economic Analysis. 11
Industry Overview: Gaming 2005-2007: Gaming industry in Mexico grew 60%, potential for much additional growth Gaming industry revenues in Mexico represent 0.2% of GDP (Ps. 16.6 billion) Gaming Revenues as % of GDP (2006) Argentina 2.0 Colombia 1.8 USA Brazil 0.9 1.0 Chile 0.5 Mexico 0.2 Sources: Opportunities in Gaming, ATE Intelligence, American Gaming Association, US. Dept. of Commerce Bureau of Economic Analysis. 12
Industry Overview: Traditional Media 2006 advertising spending in Mexico: Ps. 50 billion Each square = Ps. 200 million Open TV 29,173 m Radio 5,163 m 4,822 m 4,296 m Newspapers Magazines Pay TV Outdoors 1,948 m 1,718 Cinema 806 m 1,532 631 Directories Internet Open TV: 1.03% share Outdoor : 10.5% share Cinema : 74.4% share Source: Media Book. Merca2.0 Edición Especial 2008 13
Agenda 1. Introduction to CIE 2. Industry Overview 3. Business Strategy 4. Financial Performance 5. Summary 14
Business Strategy: CIE Entertainment Strategy Through unique vertical integration model, CIE maximizes revenues / minimizes risks Access to largest, most prominent venue network in Mexico Substantial critical mass with more than 5,000 events Objectives Expand in Central America and midsize Mexico cities through alliances Maximize use of technology Develop Internet entertainment communities Launch entertainment content to mobile devices 15
Business Strategy: CIE Las Americas Strategy First mover advantage for prime locations Strong technology partner (IGT) Best practices established through 8 years of experience State-of-the-art facilities Objectives Continue deploying of bingo network: 43 current locations with 65 licenses Diversify game supply: Electronic Bingo Dices Multigames InterYak Traditional Bingo 16
Business Strategy: CIE Commercial Strategy Leverage value of Group s core businesses, venues, audiences Wide range of channels and formats Advertising vehicles that enable clients to reach well-segmented audiences in innovative and efficient ways Objectives Expand reach of BTL agency Innovate: mobile, Internet and alternative media 17
Agenda 1. Introduction to CIE 2. Industry Overview 3. Business Strategy 4. Financial Performance 5. Summary 18
Key Financial Data 2Q2007 2Q2006 Var. % 6M2007 6M2006 Var. % Revenues 2,611.8 2,444.1 7% 5,014.7 5,112.5 (2%) Revenues EBITDA 553.7 531.9 4% 1,064.6 1,053.8 1% EBITDA EBITDA Margin 21.2% 21.8% 21.2% 20.6% EBITDA Margin Net Interest Expense 180.3 199.2 (9%) 360.4 384.3 (6%) Net Interest Expense CCF 158.5 267.8 (41%) 327.6 435.1 (25%) CCF Other Financial Operations (20.8) 11.0 N.A. (20.8) 33.2 N.A. Other Financial Operations Income Tax 83.9 113.5 (26%) 207.1 223.7 (7%) Income Tax Deferred Income Tax 38.8 (12.3) N.A. 11.6 (12.3) N.A. Deferred Income Tax Consolidated Net Income 70.8 (46.6) N.A. 106.9 (27.9) N.A. Consolidated Net Income Majority Net Income (11.3) (120.6) (91%) (74.4) (173.2) (57%) Majority Net Income Current Assets 5,798.4 6,160.8 (6%) Long-Term Assets 10,100.2 11,235.3 (10%) Total Assets 15,898.6 17,396.1 (9%) Debt 5,920.4 6,932.5 (15%) Total Liabilities 9,832.5 11,165.2 (12%) Stockholders' Equity 6,066.1 6,230.9 (3%)
Financial Performance: Consolidated (Millions of pesos as of June 2007) +7% 2,444 2,612 REVENUES +19% (2%) +3% 5,112 5,015 4,861 +4% +14% 532 554 EBITDA +1% +6% 1,054 1,065 1,008 2,192 486 2Q06 2Q07 6M06 6M07 2Q06 2Q07 6M06 6M07 EBITDA Margin 21.8% 21.2% 20.6% 21.2% Proforma without Live Entertainment in South America during May and June 2006 OPERATING CASH FLOW* +9% +45% 696 +27% 419 654 330 288 2Q06 2Q07 6M06 +16% 761 6M07 Capex Ps.202 Ps.135 Ps.358 Ps.303
Financial Performance: CIE Entertainment (Millions of pesos as of June 2007) REVENUES 1,665 (6%) 1,564 +50% 915 +40% 133 610 95 EBITDA 199 +2% 202 2Q06 2Q07 6M06 6M07 2Q06 2Q07 6M06 6M07 EBITDA Margin 15.6% 14.6% 12.0% 12.9% OPERATING CASH FLOW* REVENUES CIE 6M07 EBITDA CIE 6M07 31% 19% +106% 127 +52% 126 191 62 Capex 2Q06 Ps.33 2Q07 Ps.6 6M06 Ps.74 6M07 Ps.11 REVENUES CIE 6M06 EBITDA CIE 6M06 33% 19%
Financial Performance: CIE Las Americas (Millions of pesos as of June 2007) +12% 801 899 +14% REVENUES 1,796 1,571 +16% 226 261 EBITDA +16% 540 466 2Q06 2Q07 6M06 6M07 2Q06 2Q07 6M06 6M07 EBITDA Margin 28.2% 29.0% 29.7% 30.1% OPERATING CASH FLOW* +51% 331 REVENUES CIE 6M07 EBITDA CIE 6M07 36% 51% +70% 86 146 220 REVENUES CIE 6M06 EBITDA CIE 6M06 2Q06 2Q07 6M06 6M07 31% 44% Capex Ps.140 Ps.115 Ps.247 Ps.209
Financial Performance: CIE Commercial (Millions of pesos as of June 2007) REVENUES +7% 493 529 +5% 954 1,004 +7% 111 119 EBITDA +4% 225 233 2Q06 2Q07 6M06 6M07 2Q06 2Q07 6M06 6M07 EBITDA Margin 22.4% 22.5% 23.6% 23.2% OPERATING CASH FLOW* REVENUES CIE 6M07 EBITDA CIE 6M07 20% 22% +12% 101 112 211 (20%) 169 REVENUES CIE 6M06 19% EBITDA CIE 6M06 21% 2Q06 2Q07 6M06 6M07 Capex Ps.10 Ps.7 Ps.14 Ps.64
Financial Performance: Other Businesses - International (Millions of pesos as of June 2007) 377 125 REVENUESS (70%) (11%) 112 631 379 (41%) (2%) 371 69 23 EBITDA (80%) (41%) 14 116 70 (61%) (35%) 45 2Q06 2Q07 6M06 6M07 2Q06 2Q07 6M06 6M07 EBITDA Margin 18.2% 12.1% 18.3% 12.2% Proforma without Live Entertainment in South America during May and June 2006 OPERATING CASH FLOW* 106 (78%) 63 (36%) 64 21 14 2Q06 2Q07 6M06 (64%) (41%) 38 6M07 REVENUES CIE 6M07 EBITDA CIE 6M07 7% 4% REVENUES CIE 6M06 EBITDA CIE 6M06 12% 11% Capex Ps.6 N.A. Ps.9 Ps.7
Financial Performance: Other Businesses - Parks (Millions of pesos as of June 2007) (3%) 163 157 REVENUES (4%) 291 279 32 (16%) 27 EBITDA 48 (9%) 43 2Q06 2Q07 6M06 6M07 2Q06 2Q07 6M06 EBITDA Margin 6M07 19.7% 17.1% 16.3% 15.5% OPERATING CASH FLOW* (6%) 34 +6% 32 19 20 REVENUES CIE 6M07 EBITDA CIE 6M07 6% 4% REVENUES CIE 6M06 EBITDA CIE 6M06 2Q06 2Q07 6M06 6M07 6% 5% Capex Ps.13 Ps.7 Ps.14 Ps.12
Debt as of June 2007 (Millions of pesos as of June 2007) Total = 5,920 1,771 2,159 861 231 488 380 14 17 2007 2008 2009 2010 2011 2012 2013 2015 Currency Breakdown 53.8% 40.6% 5.6% Pesos Dollars Udis Tenor Breakdown 90.9% 9.1% LT ST Ratios 2Q07 2Q06 Net Interest Coverage* 2.7x 2.1x Net Debt / EBITDA* 2.0x 2.9x WACC 13.0% 12.0% WACD 9.7% 9.9% Hedge Debt 27.3% 26.7% Swap Coupon 16.9% 16.6% Swap Principal 10.4% 10.1% Fixed 40.0% 42.9% Float 60.0% 57.1% LTM
Agenda 1. Introduction to CIE 2. Industry Overview 3. Business Strategy 4. Financial Performance 5. Summary 27
Summary CIE is focused on strengthening its financial structure CIE ensures that the execution of the business model generates profitable and sustainable growth, thus continuing to deliver: Thriving live entertainment business Leadership in gaming The most effective means to connect brands with targeted market segments 28
Appendix 29
Appendix 1: Vertical Integration US$ 100 in Box office receipts US$ 35 Additional revenue streams Venue US$ 12 Promotion US$ 10 Artists US$ 40 Expenses US$ 38 Sponsorship US$ 27 Ticketing US$ 7 F&B / Merch. US$ 1 BREAK EVEN POINT CIE operates five different revenue streams in entertainment events, which lowers CIE s breakeven point of attendance to 50% COMPETITIVE ADVANTAGE By controlling the entire entertainment value chain, CIE is able to: Promoter 82% Generate multiple revenue streams Sponsorship Venue Operator Ticket Sales 54% 51% 65% Require lower attendance to break even Reduce project risk Apply an aggressive strategy in bidding for events Food & Beverages 49% 0% Attendance * 100% * CIE s Average Attendance: 80% 30
Appendix 2: Gaming Concessions CIE Las Americas revenues are built on Las Americas Complex, the largest Entertainment Center in Latin America: The complex currently operates a hippodrome, live and remote betting options (Books and Yaks), a convention center, a petting zoo and 3 restaurants The 52 hectares terrain in one of the most exclusive areas of Mexico City is divided into two concessions awarded in 1997: Concession I: 25 years, renewable for another 25 years Horse racing (11 hectares) Concession II: 50 years, renewable for another 50 years Centro Banamex, Granja and future developments: Hotel and entertainment street Also included in the concession package are betting licenses for 65 closed locations (currently 45 are being used through Books and Yaks) The Seceretaria de Gobernación liberalized gaming in 1997 by permitting licenses (previously authorized only for offtrack betting) to open bingo halls, both on-track and off-track, which as of today represent between 60% and 70% of the official gaming industry 31
Appendix 3: Electronic Terminals The Company has signed an agreement with IGT for the use of their technology in Mexico CIE is the exclusive distributor of this technology in Mexico CIE expects to install up to 9,000 terminals by the year 2008 (Currently 7,000 are operational) IGT is a global company specializing in the design, development, manufacturing, distribution and sales of computerized gaming machines and systems products 32
Appendix 4: Gaming Licenses Todays market includes 380 permits issued by the authorities. Authorized : 380 In Operation: 155 EF 5% JyJ 5% Otros 10% Caliente 24% JyJ 3% EF 2% Otros 15% Caliente 33% EdM 8% Emotion 15% Pringsa 14% CIE 17% Televisa 17% Televisa 8% CIE 24% 33
Appendix 5: Capital Structure 359 million, one series of shares with equal voting rights. Market Cap Ps.11,164 million (Oct. 1, 2007) Ticker: CIE (Bolsa Mexicana de Valores) Management Group 24% Free Float 76% 34
www.cie.com.mx 35